The government says concessions including release of prisoners and removal of troops from the streets led only to demands that the government yield on most major points before beginning negotiations.

The commission led by the internationally respected Cherif Bassiouni documented many government human rights abuses but also acknowledged abuses by the demonstrators.

Radical fringes have severely hampered efforts at compromise. Sunni demonstrations supporting the government may have been as large as those for the opposition.  An energized Sunni block opposes any concession, regards the Shia as Iran’s proxies, and believe concessions demonstrate weakness and only inspire more demands.
On the other side, the major Shia opposition party al-Wafaq -- immobilized by fears of being out-maneuvered by its own radical fringe and suspicious of the government -- has refused negotiations, thus reinforcing government hard line views that compromise is impossible. Community splits deepened radically where once Shia and Sunni used to intermarry and socialize more freely than in any other Gulf state.
Understanding the communal aspect is essential to formulating sensible policy. When people vote by community losers cannot become winners; one-man-one vote democracy becomes a codeword for majority domination. Bahrain badly needspolitical reform but to bring peace reform needs a community balancing mechanism to prevent deadlock.
The regional dimension is also important. The Arab monarchies of the Gulf Cooperation Council (GCC), determined to support their fellow monarch stationed GCC forces in Bahraini. While not used against demonstrators, they symbolize GCC support just as GCC money ensures that the Bahraini monarchy can withstand economic disruption. The unified Arab pressure seen in Libya and Syria will not be replicated in Bahrain. Sufficient force is available to keep the opposition from winning by confrontation but force alone cannot redress grievances nor restore stability. 
The US has multiple interests. Bahraini loyalty in our wars and crises does not trump everything but neither is it meaningless. Our naval base is essential to the free flow of oil in the Persian Gulf, confronting Iran if necessary, and managing the counter-piracy mission in the Arabian Sea. A Gulf oil blockagewould return the US economy to recession. The naval role cannot be managed from outside the Gulf; interior basing of mine sweepers, command networks, and repair facilities are all critical. The GCC support of Bahrain guarantees that no other Gulf state will help us pressure Bahrain by relocating the base inside the Gulf even if we could afford the billions involved.   
Yet reform is also a major US interest, both as a matter of deeply held principle and practicality for without reform instability will continue. Given the deep communal fears, divided counsels within Bahraini government and opposition, the external involvement and our own crosscutting interests the U.S. has only a small chance of bringing about stability through reform. Presently, we alienate everyone. The Sunnis attack us for being insufficiently supportive, the opposition for not upholding our principles and many for a perceived double standard for Arab democracy; ourinfluence declines as ferment continues.
Effective US policy needs to push for reform and speak openly about the limits to what we ask. To induce stability reform needs to include equitable representation, real judicial controls of security forces and true accountability for wrongdoing. However, a strong constitution monarchy accountable under law is needed to balance community divisions. Given the intense suspicions on all sides change will probably have to move come in steps.  We need to speak openly of both reform and support for a strong monarchy; something short of simple democracy.
Without this clarity the regime and its neighbors will see us asking them to step onto a slippery slope to oblivion. Without stating limits to what we seek the opposition will continue to hope for greater U.S. pressure on its behalf. Such a policy will be attacked as unworthy of our democratic ideals.  Yet policy must start from the situation as it is. Effective diplomacy has to meld both interests and principles and explain itself clearly.  Without such clarity we will remain ineffective and still be condemned for hypocrisy.  
Ronald E. Neumann was US ambassador to Bahrain, Algeria and Afghanistan.